After breaking through key support near the $18,000 level, Morgan Stanley strategists warned that high-profile cryptocurrency bitcoin might suffer additional losses, possibly falling to prices it reached in 2019 and 2020.
“From a technical perspective, bitcoin has now broken below $18,000, which was an area of support in recent weeks. The next levels to watch are $13,500, the 2019 high, and $12,500 (the 3Q20 high),” the market observers wrote in a note published Friday, according to CoinDesk.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
When asked for technical analysis, experts who provided input for this story pointed out several crucial levels that traders should watch for, including the ones mentioned by Morgan Stanley.
While the digital currency might drop to the price levels singled out by the major investment bank, it will first encounter important support in the low $16,000s and the mid-$15,000s, according to independent cryptocurrency analyst Armando Aguilar.
Brett Sifling, an investment advisor for Gerber Kawasaki Wealth & Investment Management, also chimed in, specifically highlighting the importance of the $12,500 and $13,000 levels, as “the 2019 high and 3Q20 high could act as a support level going forward.”
He noted that if bitcoin falls below the aforementioned price points, the “$10,000 level would be a major support level.”
“Not only is $10,000 a round number that psychologically attracts investors, but it also served as support before the last major breakout back in late 2020,” said Sifling.
While many cryptocurrencies suffered losses because of the recent FTX saga, it “seems the market has currently priced most foreseeable defaults/contagion” regarding the exchange’s failure, Aguilar claimed.
“Despite a volatile week, based on data from Coinglass, investor open interest in CME BTC futures slightly increased during the week, with volume north of $25B with $1.5B in CME open interest,” he stated, citing figures gathered November 15.
The chart below illustrates this activity:
“Despite a sell off, investors still show appetite for Bitcoin,” he emphasized.
The analyst further referenced settlement data for CME bitcoin futures, which showed that market participants trading these derivatives contracts expect the digital currency will fluctuate between roughly $16,000 and $17,000 for the rest of 2022 and early 2023.
The chart below shows these expectations:
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.